In 1999 VC fund 10 year returns peaked at 83.4%, no typo.
The success getting out says nothing about the quality of new investments.
Further, unless VC's start returning funds to limited partners expected future returns can only go down as the ability to get liquid results in too much money chasing too few deals.
On top of that corporate America looking for places to put its trillion or so to work will be getting more and more active in the game. Hell, even 7-Eleven has set up a venture arm.
From peHUB:
Many venture capitalists like to think the industry’s decade-long bloodletting is coming to an end. Don’t be too quick to agree.Unfortunately I can only think of a handful of publicly traded venture firms to short long term and anyway it is much too early to do so, maybe 2017 or so and maybe some of the bigger ones will decide to try for one last score and come public themselves.
More pruning might be on the way, despite a consolidation that has done away with or created zombies out of as many as half of the 1,053 firms active at the height of the dot-com bubble.
It comes down to simple math. The industry continues to invest more than it takes in at a time when capital concentration is putting resources in the hands of a few mega firms.
Sure, distributions and returns are on the rise, as is the venture-backed IPO market. But negative sentiment remains high among LPs, and venture firms at the margin of the business are likely to face questions of survival when they go back for new money.
It is not a surprise that many in solid, prosperous firms sense a period of stability. The pace of investing has steadied at between $25 billion and $30 billion, and attractive portfolio exits are becoming more frequent. Startup innovation is exciting and disruptive.
“I feel we’re almost all the way through the cleansing, which should result in a very healthy venture ecosystem,” said Adam Marcus, a managing director at OpenView Venture Partners. “Generally it feels like were in a great, steady state.”
But here are the startling facts. The industry continues to downsize at a considerable pace. For instance, only 221 U.S. firms invested $4 million or more in new companies year to date through the first week of December. That’s down almost 39% from 2007, when 360 firms made that size investment.
Viewed from a deals perspective, that’s just 123 firms backing five or more new companies, off a quarter from 2004, when the number stood at 163....MORE
*Cambridge Associates Oct. 31, 2013: Venture Capital Fund Performance Strengthens Across Most time Horizons (5 page PDF)
